Synovus Financial Corp. today reported financial results for the quarter ended December 31, 2012.

Fourth Quarter Results 

• Net income available to common shareholders was $712.8 million for the fourth quarter of 2012, compared to net income available to common shareholders of $16.0 million for the third quarter of 2012 and $12.8 million for the fourth quarter of 2011. Net income available to common shareholders was $775.0 million for the year ended December 31, 2012, compared to a net loss attributable to common shareholders of $118.7 million for the year ended December 31, 2011.
• Diluted net income per common share for the fourth quarter of 2012 was $0.78, compared to diluted net income per common share of $0.02 for the third quarter of 2012 and $0.01 for the fourth quarter of 2011. Diluted net income per common share for the year ended December 31, 2012 was $0.85, compared to a net loss per common share of $0.15 for the year ended December 31, 2011.
• The fourth quarter results include an income tax benefit of approximately $800 million from the recapture of substantially all of the deferred tax asset valuation allowance. The recapture of the deferred tax asset drove the $0.89 increase in tangible book value per share during the quarter to $2.96.
• The fourth quarter results also reflect the successful completion of distressed asset sales of approximately $545 million, including the execution of a bulk sale effective December 10, 2012. The fourth quarter distressed asset dispositions resulted in a pre-tax charge of approximately $157 million. 

“Our fourth quarter performance represents another huge step forward for our company,” said Kessel D. Stelling, Chairman and CEO of Synovus.  “The recapture of the deferred tax asset is a significant milestone that reflects years of progress and further demonstrates our company’s return to a position of strength.  Additionally, the successful execution of the bulk sale during the fourth quarter accelerates credit quality improvement and also enhances our future financial performance.”  

Core Performance

Pre-tax, pre-credit costs income was $108.0 million for the fourth quarter of 2012, down $3.5 million from $111.5 million for the third quarter of 2012.

• Net interest income was $207.5 million for the fourth quarter of 2012, down $4.9 million from $212.3 million in the previous quarter.
• The net interest margin was 3.45%, down six basis points from the third quarter of 2012, due to a decline in the yield on earning assets of ten basis points partially offset by the decline in the effective cost of funds of four basis points.
• Total non-interest income was $80.1 million for the fourth quarter of 2012, up $6.9 million, compared to $73.2 million in the third quarter of 2012.
• Non-interest income, excluding net investment securities gains, was up $5.3 million from the previous quarter.
• Financial Management Services revenue, which includes fiduciary and asset management fees, brokerage revenue, and insurance revenue, was up $1.0 million from the third quarter of 2012.
• Service charges on deposit accounts were up $0.5 million from the previous quarter. 
• Total reported non-interest expense was $213.3 million for the fourth quarter of 2012 compared to $191.5 million for the previous quarter.
• Core expenses (excludes Visa indemnification charges, restructuring charges and other credit costs) were up $4.0 million from the third quarter of 2012.
• Salaries and other personnel expenses increased $1.7 million from the previous quarter, due primarily to incentive compensation expenses.
• Professional fees were $2.0 million higher than the previous quarter.

“We have made substantial progress in aligning our operating costs with the current size of our organization,” said Stelling. “Core expenses decreased by $25.1 million and $95.3 million in 2012 and 2011, respectively, reflecting the impact of the efficiency initiatives implemented during those two years. We have identified new expense savings initiatives of approximately $30 million, with the implementation of these initiatives already underway and continuing throughout 2013. We remain keenly focused on improving efficiency while we also strategically invest in talent and infrastructure that drive growth and improve our customers’ experience.”  

Balance Sheet Fundamentals

• Total reported loans declined by $190.2 million during the fourth quarter driven by distressed loan sales of approximately $475 million.
• On a sequential quarter basis, net loan growth was approximately $345 million for the fourth quarter, compared to approximately $240 million during the third quarter of 2012 and approximately $167 million during the fourth quarter of 2011. Net loan growth excludes the impact of loan sales, transfers to loans held-for-sale, charge-offs, and foreclosures. 
• Loans outstanding from the Corporate Banking Group were up approximately $205 million compared to the previous quarter and up approximately $583 million over the previous year.
• Total deposits ended the quarter at $21.1 billion, up $210.2 million from the previous quarter due primarily to increases in NOW account balances and non-interest bearing demand deposits.
• Core deposits ended the quarter at $20.0 billion, up $37.4 million compared to the third quarter of 2012. Core deposits, excluding time deposits, increased $225.2 million compared to the previous quarter. 
• The effective cost of core deposits (includes non-interest bearing deposits) continued to decline, with an effective cost of 30 basis points for the fourth quarter of 2012, down from 34 basis points for the previous quarter and 53 basis points for the fourth quarter of 2011.

Credit Trends

• Distressed asset sales were approximately $545 million during the fourth quarter, compared to approximately $110 million in the third quarter of 2012, and approximately $147 million in the fourth quarter of 2011.
• Non-performing loan inflows were $262.7 million in the fourth quarter of 2012, up from $114.8 million in the third quarter of 2012 and $189.2 million in the fourth quarter of 2011. Inflows increased during the fourth quarter of 2012 due to the addition of one larger credit relationship to non-performing status. Substantially all of this relationship was previously classified as substandard accruing, and therefore had minimal impact on classified assets during the quarter. 
• Non-performing loans, excluding loans held for sale, were $543.3 million at December 31, 2012, down $156.9 million from the previous quarter, and down $339.7 million or 38.5% from the fourth quarter of 2011. The non-performing loan ratio was 2.78% at December 31, 2012, down from 3.55% at the end of the previous quarter and 4.40% at December 31, 2011.
• Total non-performing assets were $703.1 million at December 31, 2012, down $196.3 million from the previous quarter, and down $414.3 million or 37.1% from the fourth quarter of 2011. The non-performing asset ratio was 3.57% at December 31, 2012, compared to 4.51% at the end of the previous quarter and 5.50% at December 31, 2011.
• Synovus Bank’s classified assets, as a percentage of Tier 1 capital and the allowance for loan losses, declined to 38.0% at December 31, 2012, down from 50.7% at September 30, 2012 and 62.5% at December 31, 2011. Synovus Financial Corp’s classified asset ratio was 44.8% at December 31, 2012.
• Total delinquencies (consisting of loans 30 or more days past due and still accruing) were 0.54% of total loans at December 31, 2012, compared to 0.55% at September 30, 2012, and 0.74% at December 31, 2011. Total loans past due 90 days or more and still accruing were 0.03% at December 31, 2012, compared to 0.05% at September 30, 2012, and 0.07% at December 31, 2011.
• Total credit costs were $185.8 million in the fourth quarter of 2012, up from $85.6 million in the third quarter of 2012 and $90.5 million in the fourth quarter of 2011, primarily due to the distressed asset sales in the fourth quarter of 2012. 
• Net charge-offs were $193.5 million in the fourth quarter of 2012, up from $96.5 million in the third quarter of 2012 and $113.5 million in the fourth quarter of 2011, due to the higher level of distressed asset sales during the fourth quarter. The annualized net charge-off ratio was 3.94% in the fourth quarter, up from 1.97% in the previous quarter and 2.26% in the fourth quarter of 2011. 

Capital Ratios 

• Tangible Common Equity/Tangible Assets ratio was 9.67% at December 31, 2012 compared to 7.35% at September 30, 2012.
• Tier 1 Common Equity ratio was 8.72% at December 31, 2012 compared to 8.73% at September 30, 2012.
• Tier 1 Capital ratio was 13.24% at December 31, 2012 compared to 13.23% at September 30, 2012.
• Tier 1 Leverage ratio was 11.00% at December 31, 2012 compared to 10.97% at September 30, 2012.
• Total Risk Based Capital ratio was 16.18% at December 31, 2012 compared to 16.16% at September 30, 2012.

Stelling concluded, “While we are certainly mindful of the continued headwinds facing our entire industry, including slow growth as well as economic and political uncertainty, we are encouraged by our momentum heading into 2013.  Our deferred tax asset recapture and a successful bulk sale are behind us, and we expect to repay TARP by the end of this year. Our customers remain our primary focus, and the efforts of our dedicated bankers, along with our relationship style of banking, continue to drive improved performance across our footprint, as evidenced by net loan growth of $345.4 million for the fourth quarter and $588.8 million for the year.  We also saw positive growth trends in mortgage and investment services during 2012, and our Family Asset Management team was recently recognized by Bloomberg Markets Magazine as one of the ‘Top 50 Family Offices’ in the world.  This has been a transformational year for our company, and I want to thank all of our team members for their loyalty, perseverance, and intense passion for serving our customers and communities.  I also want to thank our customers for their continued trust and confidence in us.  We look forward to earning the right to be their bank for many years to come.”